Executive Summary

Q2 2025 delivered double‑digit top-line growth with software solutions as the primary engine; revenue was $16.55M, up 13% YoY, GAAP EPS was $0.04, and non‑GAAP diluted EPS was $0.09 .
Results beat Wall Street: revenue of $16.55M vs $16.27M consensus (+$0.29M, +1.8%) and non‑GAAP EPS $0.09 vs $0.061 consensus (+46.5%); GAAP EPS was flat at $0.04 .*
Operating margin rose to 7% (vs 4% YoY) as mix shifted toward higher‑margin software; consolidated gross margin was 63% (down 200bps QoQ from 65% in Q1) .
Management reiterated double‑digit organic growth and flagged margin expansion from OCI migrations skewed to 2026 (US data center closures), with RPO rising to $83.5M as a forward demand indicator .

What Went Well and What Went Wrong

What Went Well

Software Solutions revenue grew 31% YoY to $7.0M; segment gross margin improved to 74%, highlighting strong operating leverage .
Backlog/RPO increased to $83.5M (from $81.9M in Q1 and $71.2M YoY), supporting multi‑year revenue visibility; weighted toward the first three years .
Management emphasized disciplined growth and OCI migration progress: “We are aggressively migrating to Oracle Cloud Infrastructure (OCI)…a move we expect to yield significant cost savings and improved focus on innovation” .

What Went Wrong

Consolidated gross margin contracted to 63% from 65% in Q1, with telecom services gross margin at 56%, pressured by product margin mix and reinvestment; major savings expected only after US data center closures in 2026 .
Product revenue fell 7% YoY to $1.20M as the company deliberately avoided lower‑margin opportunities; retail telecom growth (~2% organically) remains below desired double‑digits .
Competitive pricing remains “irrational” in UCaaS; management is not pursuing unprofitable deals, which could cap near‑term retail growth vs peers chasing promotions .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025 Actual	Q2 2025 Consensus
Revenue ($USD Millions)	$16.20	$16.06	$16.55	$16.27*
GAAP Diluted EPS ($)	$0.02	$0.04	$0.04	—
Non‑GAAP Diluted EPS ($)	$0.06	$0.08	$0.09	$0.061*
Net Income ($USD Millions)	$0.51	$1.17	$1.23	—
Adjusted EBITDA ($USD Millions)	$2.20	$2.60	$2.78	—
Consolidated Gross Margin %	61%	65%	63%	—

Segment Revenue ($USD Millions)	Q4 2024	Q1 2025	Q2 2025	Q2 YoY Change	Q2 QoQ Change
Service	$8.00	$8.18	$8.37	+3.8%	+2.4%
Software Solutions	$7.00	$6.87	$6.98	+30.9%	+1.6%
Product	$1.20	$1.01	$1.20	−7.0%	+19.5%

Margins	Q4 2024	Q1 2025	Q2 2025
Software Solutions Gross Margin %	68%	78%	74%
Telecom Services Gross Margin %	57%	57%	56%
Consolidated Gross Margin %	61%	65%	63%

Notes: *Values retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth	FY 2025	“Minimum double‑digit YoY”	“Maintain double‑digit organic growth”	Maintained
Margin Outlook	2025–2026	Expect improvement as OCI migration completes	Major savings skewed to 2026 when US data centers are shut; minimal near‑term international impact	Timing clarified (weighted to 2026)
Retail Telecom Growth	FY 2025	Profitably expand retail; avoid low‑margin deals	Focused on accelerated telecom services; target channel momentum and improved pace over time	Maintained qualitative focus

No numeric revenue/EPS ranges were provided; management emphasized qualitative trajectory and margin drivers .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI/Technology Initiatives	Rolled out v44.2 with AI features; awards; EVP ecosystem momentum	Expanding AI roadmap (AI call bots, operator, messaging); open API differentiation	Accelerating
Data Center/OCI Migration	Plan to close data centers; full OCI migration targeted by year‑end 2025	International data centers closed; US migrations underway; savings weighted to 2026	Executing; savings deferred
Competitive Pricing (UCaaS)	Not engaging in price wars; value and service differentiation	Market still “irrational”; winning via product/service value	Unchanged competitive backdrop
Licensee Migrations (BroadSoft/Metaswitch)	2024 wins: 7 Metaswitch, 3 BroadSoft; strong pipeline	Added 2 new logos in Q2; active sandboxes; licensee count ~240	Continued momentum
Channel/Master Agents	18% YoY growth in 2024	88% YoY increase in bookings; focused on fewer aligned TSD partners	Strengthening
International Expansion	EU/Australia traction; first licensee in Africa	OCI enables flexible localized deployment; focus on Europe/Australia	Broadening
Margin Trajectory	Q1 consolidated margin 65%; software margin 78%	Consolidated 63%; software 74%; telecom 56%; savings largely post US closures	Near‑term reinvestment, long‑term upside

Management Commentary

“We achieved a 13% year‑over‑year increase in total revenue to $16.6 million, driven by particularly impressive 31% growth in our software solutions segment…This marks our eighth consecutive quarter of GAAP profitability and 27th consecutive quarter of Non‑GAAP net income.” — Jeff Korn, CEO .
“We are in the final stages of sunsetting our classic platform…aggressively migrating to Oracle Cloud Infrastructure (OCI)…We remain focused on accelerating telecom services revenue through disciplined, profitable sales initiatives and a targeted review of strategic, accretive acquisitions.” — Jeff Korn .
“Operating margin for the quarter increased to 7%…Adjusted EBITDA…$2.8 million…Cash and cash equivalents at 06/30/2025 was $23.5 million.” — Ron Vincent, CFO .
“Master agent technology service distributors saw an 88% increase in sales bookings year over year…we successfully completed our international data center migration to OCI.” — Doug Gaylor, President & COO .

Q&A Highlights

Licensee dynamics: Added two new licensees; active count near ~240; larger average new‑logo revenue; continued migrations from BroadSoft and Metaswitch .
Margin timing: Major margin savings expected after US data center closures; international savings minimal near‑term as reinvestment offsets .
Channel strength: Focused strategy with select TSDs driving 88% YoY bookings growth; emphasis on execution and customer service (G2 rankings) .
Retail pricing environment: Competitors’ “irrational” pricing persists; Crexendo will not pursue unprofitable growth and wins on value proposition .
RPO composition: Heavily weighted to first three years (indicative run‑off: $23M in 2025, $27M in 2026, $18M in 2027, $9M in 2028, $5M in 2029) .

Estimates Context

Metric	Q2 2025 Consensus	Q2 2025 Actual	Surprise
Revenue ($USD Millions)	$16.27*	$16.55	+$0.29M (+1.8%)*
Primary EPS ($)	$0.061*	$0.09	+$0.029 (+46.5%)*

Notes: *Values retrieved from S&P Global. Primary EPS reflects normalized/non‑GAAP; GAAP diluted EPS was $0.04 .

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
RPO / Backlog ($USD Millions)	$85.6	$81.9	$83.5
RPO Run‑off (2025/26/27/28/29, $USD Millions)	—	—	23 / 27 / 18 / 9 / 5
Cash & Cash Equivalents ($USD Millions)	$18.19	$21.21	$23.45
Operating Cash Flow ($USD Millions)	—	$1.24 (3M)	$2.53 (6M YTD)

Key Takeaways for Investors

Beat vs consensus on revenue and non‑GAAP EPS, driven by 31% software growth and disciplined cost control; GAAP EPS flat due to reinvestment and mix .*
Software remains the core growth engine with rising margins (74%), while telecom services are steady but constrained by competitive pricing; expect retail growth to improve via channel momentum (88% bookings increase) .
Margin expansion is a medium‑term story: OCI migration benefits are back‑weighted to 2026 upon US data center closures; near‑term reinvestment tempers consolidated margins .
Strengthening visibility: RPO at $83.5M, heavily front‑loaded over the next three years, underpins revenue trajectory and supports Street’s double‑digit growth frame .
M&A optionality with disciplined hurdles (accretive within ~3 quarters) and strong cash ($23.45M) provide capacity to augment growth and platform capabilities .
Short‑term: Positive trading setup on the beat and Russell 2000 inclusion; monitor margins and retail growth mix next quarter .
Medium‑term: Thesis hinges on continued licensee wins from legacy platforms, AI monetization/upsell, and OCI‑driven cost takeout to expand profitability .